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DeFi’s Disturbing Privacy Problem

You walk into a local market. But you’ve never seen a place like this.

Customers maneuver the aisles, wearing white t-shirts with random number-letter combos like 0xb794f5ea0ba39494ce839613fffba74279579268. Everyone is dead quiet.

Suddenly, a blinding spotlight illuminates the customer at the front of the checkout, and a voice blasts through the speakers: “Customer 0xc39494794f5ea0bace839613fffba95792687427 has just finalized their transaction of $104.73…”

While the customer loads their purchases into their cart, the announcer mentions the details of each and every item. Somehow, the customer does not seem to mind.

Before the next customer steps up, the voice finishes, “Please visit the room near the exit if you’d like to view the financial transaction history for 0xc39494794f5ea0bace839613fffba95792687427.”

As you disbelievingly turn around, you see it: The Public Data Room. A handful of diverse characters are entering it. Clearly, none of them are here to shop.

DeFi marketplaces — transparent transactions since 2009

This story is far from fiction.

The numbers on the t-shirts are wallet addresses. The checkout line is where one of those wallets executes a transaction on a public by default blockchain. That Public Data Room where people can see the entire financial history of your wallet? It’s real, and anyone can enter it using something called a block explorer.

This is the current reality of decentralized finance. Starting with Bitcoin in 2009, almost every blockchain ever created is public by default — and rigidly transparent.

What happens when your financial data is public

If you’re reading this and wonder “what’s so bad about the spotlight and the announcer?”

Let’s talk about what happens in the Data Room. Who goes there? Who would devote time, resources, and effort to viewing the history and contents of your wallet?

Here’s a short, non-exhaustive list:

  • Blockchain analytics companies that work for corporations and governments
  • Savvy professional investors with algorithmic bots and nearly bottomless pockets who seek a trading advantage over you and the market
  • Creepy scammers trying to see who is worth scamming
  • Entities who want to monitor and ease their ability to control you

When your financial data is public, it will be used, and usually not for the best purposes.

Think of it this way. If a stranger approaches you on the street and asks you to show the contents of your wallet, would you do so? More likely, you’d wonder why they’d want to know and have some healthy caution to avoid being taken advantage of.

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Public by default: a dangerous “normal”

Why then, do so many users of DeFi apps have such a nonchalant response to all those people entering the “Public Data Room” to discover the contents of their digital wallets?

Would you ever shop at a place like DeFi market? That’s a hard pass — especially if you could buy those same items at a place that didn’t have the blinding spotlight and the booming announcer and the Public Data Room with all those people entering and leaving.

A lot of people shop at DeFi market simply because it is all they’ve ever known. Because public-by-default is “normal”.

But it can be dangerous to unquestioningly accept “normal”. Especially if that breeds the belief that this level of exposure in Web3 “is fine.”

Private DeFi: it’s possible, and it’s happening

Thankfully, new “stores” have entered the neighborhood. They don’t have as many customers yet. But these markets challenge the assumption that public by default is good enough for DeFi.

In the thriving private DeFi ecosystem on Secret, you can transact without your details being announced to the entire world. In fact, you can make your cashier close their eyes for the entire transaction (metaphorically speaking).

On Secret, there are public tokens — like native SCRT — but there are also privacy features like Secret Tokens, private swaps, and viewing keys.

Private lending and swapping are already live on mainnet, and Secret’s community is in an exciting position to marvel and say “wow, this has never been done before.”

Private DeFi Its Possible And Its Happening

Experience the future of DeFi

It’s one thing to read about a new store, but to experience it, you have to drop in for a visit. So come try out private DeFi apps like Sienna, Shade, and others, and let us know what you think!

Those folks in the Public Data Room sure are going to miss you.